1215

An analyst needs to inform his supervisor in writing of which of the following?

A) A client and the analyst alternate paying for lunch at a local sandwich shop.

B) Both the lunch and the bonus mentioned in the other answers.

C) An annual bonus, sent to the analyst by a client, which varies with the performance of the client's portfolio that the analyst manages as an employee even though no verbal or written agreement exists about the bonus.

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Standard IV(B) requires that members disclose to their employer in writing all benefits that they receive in addition to their regular compensation for services they perform on behalf of their employer. Since the bonus varies with the performance of the client’s portfolio, there is a clear link to the services of the analyst. The analyst is not required to report the lunch since it is not linked to performance.

1215

David Saul, CFA, heads the trust department at Savage National Bank. Fairway Enterprises invites Saul to sit on its Board of Directors. In return for his services on the Board, Fairway offers to provide Saul and his family with access to the facilities at Wilmont Country Club at no cost. Saul will not receive any monetary compensation for his services on the Board. According to CFA Institute Standards of Professional Conduct, which of the following actions must Saul take?

A) Saul must obtain written consent from all parties to only if he decides to accept the offer to serve on the Board of Directors.

B) Saul must disclose in writing to Savage Bank the terms of the offer whether or not he accepts the offer to serve on the Board of Directors.

C) Saul must reject the offer to serve on the Board of Directors.

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Standard IV(B) requires that members obtain written consent from all parties involved before accepting monetary compensation or other benefits that they receive for their services that are in addition to compensation or benefits conferred by a member's employer. In this situation, Saul may also be obligated to disclose his participation on Fairway's Board to clients, prospective clients, and employer under Standard VI(A), Disclosure of Conflicts.

1215

To comply with Standard IV(B), Additional Compensation Arrangements, members should do all of the following EXCEPT:

A) state the terms of oral or written agreements regarding the compensation and the duration of the agreement.

B) immediately make a written report to their employer specifying any compensation benefits they receive.

C) reject any outside compensation immediately because it is not appropriate to accept outside compensation in a business setting.

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There is no reason to reject any outside compensation immediately because it is inappropriate to accept it. However, all outside arrangements must be reported to the member’s employer.

1215

An analyst working at an investment firm has a client that rents limousines. The client tells the analyst that as long as he is the client’s analyst, he can have free use of a limousine several times a year. The analyst needs to:

A) inform his supervisor in writing of the offer if the analyst intends to accept the offer.

B) do nothing since the offer is not linked to the performance of the client's portfolio.

C) explicitly refuse such an offer.

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Standard IV(B) requires that members disclose to their employer in writing all benefits that they receive in addition to their regular compensation for services they perform on behalf of their employer. They also need to get consent from their employer in writing. The written report to the employer should include the details of any written or oral agreement for extra compensation. The analyst does not have to refuse the offer.

1215

Jill Marsh, CFA, works for Advisors where she manages a portfolio for a wealthy family. Marsh earns 1% of the portfolio’s value each year in the form of a commission from Advisors. The family just told her that any year the portfolio she manages earns more than a 10% return, the family will give her the use of the family’s vacation home for one week. Hirsh will comply with Standard IV(B), Additional Compensation Arrangements, if she:

A) does nothing with respect to this.

B) sends an e-mail to her supervisor about the vacation home.

C) delivers a typed memo to her supervisor about the vacation home the first time she uses it.

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Standard IV(B) requires that members disclose to their employer in writing all benefits that they receive in addition to their regular compensation for services they perform on behalf of their employer. E-mail messages qualify. As long as the agreement is in effect, she must inform her employer even if she has yet to use the potential benefit.